What is depreciation?

Depreciation is essentially an allowance given by the Inland Revenue for wear and tear on the building itself, and the associated chattels (e.g. carpets, drapes and appliances).  Depreciation can be claimed in your tax return and offset against your taxable income. Land cannot be depreciated.

You can choose to depreciate both buildings and chattels, chattels only, or not to depreciate at all.  In general, most investors will choose to depreciate both, as it gives them use of money now.  In some cases you may choose not to depreciate.

• How does depreciation work?
• What happens if you sell a depreciated asset?
  

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